Shares of the social-networking giant declined another 1%
early this morning, pushing the stock below $19 for the first
time ever. The stock is now trading for less than half its May 18
The latest sell-off was expected.
became eligible for release last Thursday as the first of several
lock-up agreements expired. Lock-up agreements are contracts that
prevent major investors in an IPO - venture capitalists, company
executives, etc. - from selling their shares until a certain
amount of time elapses.
Lock-up agreements typically last between 120 and 180 days.
For Facebook, the first of those agreements expired last week,
freeing approximately 10% of all outstanding shareholders from
the IPO contract that previously prohibited them from selling
The next two months will bring another two rounds of lock-up
releases. By mid-November, close to 70% of all outstanding
Facebook shares will be eligible for sale.
The stock has fallen 11% since the first set of lock-up
agreements expired. Things are likely to get even worse before
they get better.
Investors wanting to buy Facebook shares may want to wait
another couple months while the stock weathers this lock-up
Two months from now, Facebook may be so beaten-down that it
will suddenly be available at a major discount.
A stock that began public trading at more than 100 times
trailing earnings after its IPO is now on the verge of becoming a